RBS says a rights issue is in mind

THE UK's second biggest bank, Royal Bank of Scotland, has confirmed it was considering plans to ask shareholders for billions of pounds in extra funding. RBS - which owns NatWest and has 9,874 staff in Greater Manchester - told the stock market that it was 'considering a rights issue' and would make a further announcement 'in due course'.

THE UK's second biggest bank, Royal Bank of Scotland , today confirmed it was considering plans to ask shareholders for billions of pounds in extra funding.

RBS - which owns NatWest and has 9,874 staff in Greater Manchester - told the stock market that it was 'considering a rights issue' and would make a further announcement 'in due course'.

The bank could ask share-holders for as much as £12bn as it looks to strengthen a balance sheet weakened by losses from the credit crunch and its acquisition of Dutch rival ABN Amro last year. It is expected to give more details of its plans to investors tomorrow.

RBS is thought to be the first in a series of major banks about to call on shareholders for extra cash as the credit crunch bites.

Investors

But chief executive Sir Fred Goodwin (pictured) may come under pressure to step down from investors following the expected move at its annual meeting in Edinburgh on Wednesday. The rights issue would see existing shareholders at the group offered new shares at a possible discount price.

Although it would help raise billions of pounds of capital, it is thought shareholders may demand Sir Fred steps down in return for their financial injection.

RBS could also raise billions through the sale of its train leasing business Angel Trains , as well as its insurance companies First Direct and Churchill , according to weekend reports.

Churchill was bought from Credit Suisse in 2003 for £1.1bn, while Direct Line could be worth around £4bn.

RBS could unveil around £5bn extra in losses on mortgage-backed investments hit by the crunch - on top of the £2.5bn write-down already reported in its annual results, which showed profits of more than £10bn in 2007.